More on unemployment insurance and mobility (migration)

Mike Konczal has done some excellent blogging on unemployment insurance. One of his posts includes this passage about what might help the unemployment situation:

It could be that, like it is necessary for home ownership rates to go down, it will be necessary for mobility rates to increase.   And again, this could be very relevant to the places that have very high unemployment and very large housing problems (Nevada, California, Florida, etc.).

So, I e-mailed him with my question about how UI benefits might affect migration. (Tyler Cowen also suggested I talk to Konczal on this question.) Konczal referred me to a Brookings Institution paper about helping communities recover from the Great Recession. It discusses the relationship between mobility and unemployment and includes these three paragraphs:

While over time many American families will move from cities where job opportunities are limited to other parts of the country to find work, moving tends to fall during economic recessions as unemployment rises and the benefits of moving— job opportunities and higher wages—stagnate along with the wider economy (Saks and Wozniak 2007). This pattern was even more pronounced during the Great Recession: residential mobility rates in the United States are currently at a historical low even relative to past recessions, and have reached their lowest levels since World War II. In 2007–08, only 11.9 percent of Americans changed residence—the lowest rates of annual mobility since migration statistics were collected beginning in 1947–48 (Frey 2009).

Moving has both direct financial costs and nonpecuniary costs—people value the familiar people and places of their home communities. For unemployed or underemployed workers, these costs of relocating for employment are frontloaded and difficult to finance. Furthermore, loans to finance moves are either costly or unavailable—banks generally do not make such unsecured loans to unemployed people, even if the person is moving to accept or look for a job. These financial barriers are one cause of the gap in postdisplacement moving rates between college graduates, who may be better able to finance a move, and less-educated workers. For workers who do move, the rewards can be significant in terms of increased earnings.

To address this issue, Jens Ludwig and Steven Raphael call for a creation of a loan program to finance employment-related moves in their Hamilton Project discussion paper, “The Mobility Bank” (2010). The mobility bank could facilitate and speed up the moving process for some workers, increasing economic recovery in distressed areas. Ludwig and Raphael’s mobility bank would offer loans to individuals who want to look for employment in a new area or start work at a job already found. So as not to be burdensome for movers who found only lower-wage jobs, monthly loan repayments would depend on reemployment earnings. The mobility bank would be accompanied by increased use of national job banks that search more broadly for jobs to meet a given worker’s qualifications, illuminating the full set of options available to dislocated workers. With better opportunities available to them and a mobility bank from which they could draw loans, more workers may be encouraged to leave distressed communities. This could speed recovery in distressed areas by reducing the glut of unemployed labor and could have a positive effect on workers’ long-term earnings.

Not being an expert in this area, I cannot judge how much the mobility bank idea would help. But it is clear that some people have thought about the relation between unemployment and mobility. More than that, some have recognized that declining mobility in recessions is one factor that makes them deeper and last longer. Thinking about policies that might push mobility levels back up to their normal, full-employment-like rates, is sensible.

It may not be that unemployment insurance reduces mobility (nobody has pointed to anything that shows that one way or the other), but that it does not help boost mobility just when it is needed. Of course, for a given person it would be far better for unemployment rates to decline in the community in which one already resides. If unemployment has a structural component, that may not be possible. Mobility may be the fastest way to get people back to work. (I’m not suggesting today’s unemployment levels are structural. Most of it probably is not.)

By the way, if you want to see the full references cited above, just look at the Brookings paper. It’s ungated.

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